Student debt needs big fix

Published: Monday, July 29, 2013 at 08:00 AM.

Washington’s recent compromise on interest rates for student loans is a good sign as far as political compromise goes.

But the compromise itself doesn’t really do anything about the larger problem of college affordability. College costs are going up, and there is less incentive for institutions of higher learning to control costs as long as state governments and the federal government are picking up part of the tab.

So what happens? Every year, students have to borrow more, apply for more grants (ones made mostly by the taxpayers), and pay more.

The student-loan interest rate mostly affects graduates. Compromising on the rate won’t help make college more affordable. And Congress is really just postponing higher interest rates. This won’t help students in the long run.

The proposed compromise in Congress would set the rate next year on subsidized Stafford loans at 3.85 percent. Caps would also be put on loans to undergraduates (8.25 percent), graduate students (9.5 percent) and parents (10.5 percent).

The rates doubled July 1 after Congress could not initially agree on new rates. Democrats want lower rates and Republicans want them tied to market rates. Generally, both Republicans and Democrats praised the deal. No side wants to look like it supports making college unaffordable.

But if tuition and living costs continue to rise, college will be put out of reach for more students.

Washington’s recent compromise on interest rates for student loans is a good sign as far as political compromise goes.

But the compromise itself doesn’t really do anything about the larger problem of college affordability. College costs are going up, and there is less incentive for institutions of higher learning to control costs as long as state governments and the federal government are picking up part of the tab.

So what happens? Every year, students have to borrow more, apply for more grants (ones made mostly by the taxpayers), and pay more.

The student-loan interest rate mostly affects graduates. Compromising on the rate won’t help make college more affordable. And Congress is really just postponing higher interest rates. This won’t help students in the long run.

The proposed compromise in Congress would set the rate next year on subsidized Stafford loans at 3.85 percent. Caps would also be put on loans to undergraduates (8.25 percent), graduate students (9.5 percent) and parents (10.5 percent).

The rates doubled July 1 after Congress could not initially agree on new rates. Democrats want lower rates and Republicans want them tied to market rates.
Generally, both Republicans and Democrats praised the deal. No side wants to look like it supports making college unaffordable.

But if tuition and living costs continue to rise, college will be put out of reach for more students.

Perhaps more students should be looking at public colleges and universities for higher education. The costs tend to be lower. In Florida, tuition rates are among the lowest in the nation. The average cost of a bachelor’s degree from a Florida public college is $13,264.

Yet even graduates of more affordable public colleges and universities can leave school loaded with debt. Other costs add significantly to the bill.
The University of Florida, for example, estimates housing and food cost $9,500 a year for an undergraduate student living off-campus. With costs like those, we can expect some students will cancel plans to attend college.

On the other extreme, we can also expect student-loan debt to weigh down the economy. The nation’s student-loan debt is approaching $1 trillion, and has surpassed what Americans owe on automobile loans, according to the Washington Post.

It isn’t unusual for some students to finish college owing $100,000 or more. Many college graduates may postpone buying a house for a decade because of student-loan debt. There are already indications that student debt is becoming a drag on the economy.

So what have our leaders done about it? Very little.

Florida, however, has some high-profile leaders who are stressing college affordability. Gov. Rick Scott has pushed the 28 schools in the Florida College System to offer bachelor’s degrees that cost no more than $10,000 through four years. Scott also pushed successfully to get the state’s public colleges and universities to keep a lid on fees, which raise costs in a stealthy manner. Constant tuition and fee increases make Florida’s college system less affordable.
The nation and its leaders need to take a deeper look at the impact of rising tuition. We must recognize that lowering interest costs on student-loan debt isn’t a long-term solution.

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